Start an Independent Agency
Looking to start your own independent agency? Here is a helpful guide to get you on the right track!
Our Association is Here for You
Starting an independent insurance agency can feel overwhelming without a clear plan. Insurors of Tennessee is here to guide you every step of the way toward achieving your goal.
Joining our association can cultivate business opportunities for your agency, support you and your team with continuing education opportunities, and provide access to national agency marketing tools. From connecting you with industry-leading technical experts and superior Errors and Omissions coverage to leveraging the nation’s top consumer co-brand for agents and ensuring your voice is heard by policymakers—we’ve got you covered.
The following outline offers valuable insights to help you plan your new venture with confidence. Click each section to expand the details.
Timeframe
Opening a new agency takes time and can depend on your personal situation. You can expect at least six months to arrange financing and at least 30 days to obtain Errors & Omissions Insurance.
Big I members have access to an exclusive Errors & Omissions Insurance product through the Insurors of Tennessee. Contact Stephen Holmes sholmes@insurors.org or (615) 515-2609 to see if your agency is eligible for coverage or if there is another E&O market solution.
Financial Planning
You will need start-up capital to determine your office space:
- Furniture
- Computer and IT equipment
- Copiers
- Phone systems
- Postage meter
- Errors & Omissions Insurance
- Agency Management System
- HR Services
- Payroll services
- wages and benefits for future employees
- potential costs for recruiting services.
If you own your book of business with a current agency, you will need capital to buy out the agency portion based on your agency producer agreement.
As a member of the Independent Insurance Agents and Brokers (IIABA - the Big "I") network, InsurBanc, is an independent community bank that was founded by agents exclusively for agents. InsurBanc understands the insurance business they can be a valuable asset toward helping you own and operate an independent insurance agency. You can access their website at InsurBanc.com.
Legal Criteria
If you do not have an attorney we recommend selecting an attorney with experience in the insurance industry. If you are currently a producer you may have a non-compete agreement or other contractual issues for which you may need to consult an attorney.
Additionally, the following steps outline the requirements to meet the legal criteria to sell insurance in Tennessee:
- Choosing the type of Legal Structure of your business needs to be determined i.e. Corporation, S Corporation, LLC, partnership or sole proprietorship. While a sole proprietorship is the least expensive and easiest to create, it does carry the risk of personal liability for the owners. Partnerships and Corporations can afford further protection for the owners but requires more paperwork and expense to create. The IRS has some resources at https://www.irs.gov/e-file-providers/e-file-for-business-and-self-employed-taxpayers. The State of Tennessee also has a business resource web page at www.tn.gov/business/new-businesses-mp-business-btc.html. This web page will also be where you can request a Tax Identification number from the State. If you are a sole proprietor you will use your Social Security number as your Tax Identification number, The IRS requires a Tax ID number for all entities. You also need to obtain a Business Entity License from the State of Tennessee.
- Deciding which products to sell will help you determine what types of insurance licenses you need. You will need both an agency license and producer(s) licenses. The two most common license types are a Property and Casualty license and a Life, Health and Accident license. Tennessee no longer requires a pre-licensing class to take the licensing test. For licensing requirements you can visit the PearsonVue website for assistance and to schedule your exam if necessary. If you need a pre-licensing class you can do that through our company partner ExamFX.com or visit our website at https://www.insurors.org/become-a-licensed-agent/ to view pre-licensing class opportunities.
In securing company contracts, a business plan will be critical. Your business plan should address the following:
People
The fundamental value of an agency is in the capability of its people to execute its goals and objectives. Your business plan should include detailed information about the people who are responsible to execute it. At a minimum, include resumes of each of the key players that describe the professional and personal background relevant to the agency business as well as the knowledge, skills and abilities possessed by each. For start-ups, not having a proven track record may inhibit your ability to attract prospective employees, customers and carriers. To mitigate this uncertainty, include an explanation of who you know and how you may be recognized in the community and/or industry.
The Opportunity
A key to agency success and of interest to all current and potential stakeholders is how the agency plans to acquire customers, including competitors. This section should demonstrate that you know who your customer is, what your products and services are and how you will position your products and services over those of your competitors.
The Business Environment
Your business plan should demonstrate that you have a keen awareness of the external business environment in which you operate, that you understand its impact on your business prospects and how you will navigate and exploit it. The discussion should encompass regulation, the economy, labor supply, customer markets, suppliers, competitors and in what way the status of these factors is relevant to the operation of your agency.
The Risks
Many business plans, especially those that will be used outside the agency to attract stakeholders, often make the mistake of painting only a rosy picture; however, risk is inevitable. The best business plan readily identifies and confronts the risks to be faced. Potential stakeholders, especially prospective carriers, will develop confidence in those agencies that acknowledge the risks and provide strategies to resolve them.
The Numbers
You need to have realistic expectations of where revenues will come from and when and how cash will be utilized. Insurance carriers will be interested in growth projections. At a minimum, you should have a start-up budget, a cash flow forecast and a production forecast.
Develop an Executive Summary
- Overall Mission
- Primary Objectives
- Keys to Success
- Financial Plans
- Profit forecast for at least 3 years
Business Summary
- Business Overview
- Summary of Startup costs
- Funding you will require
- Company executives/ownership
Services
- Outline the types of insurance you will sell
- Outline any other services you will provide
Market Analysis
- Overall Business Analysis to include:
- Details of your competition
- Market segmentation and analysis
- Target market strategies to include details for each market segment
Strategy
- Your Competitive Edge
- Marketing Strategy
- Sales Strategy to include yearly sales projections
- Key Milestones
Management
- Develop a flow chart for potential positions and reporting structure
- Develop a plan for recruiting staff
- Develop HR Policies and Procedures
- Start researching benefits packages and providers
Financial Plan
- Identify funding you have accepted and any additional funding you need
- Detail the startup costs
- Calculate your break even point
- Develop profit projections both gross and net for each year
- Anticipated losses if any
- Cash Flow patterns
- Plans for balance sheet
- Calculations of important business ratios
- Revise and adjust the plan over time
Although direct appointments are ideal in the early stages, there may be a need to work with wholesalers as well as other indirect access points to insurers. You will want to prepare an appointment package which consists of copies of your agency license, producer licenses, E&O Declarations page, bank accounts (trust and operating), flood certification if applicable and voided checks.
The Big I offers The Right Start Series: A Tool Kit to Grow and Gain Your Business Appointments and helps you prepare for the conversation with companies. AM Best Company is another resource to help you understand what insurance markets to represent.
Insurors of Tennessee members receive immediate exclusive access to Insurance companies through the following:
Big I Alliance
Big “I” Alliance was created to bring our agent market access solutions and helping independent agents live, thrive, and survive. The Big I Alliance program encompasses three program tiers to serve agencies:
Big “I” Alliance Blue, formerly Big “I” Markets, provides a competitive market access solution for Big “I” member agencies. Members may access personal and commercial lines including auto and home, bonds, cyber, small commercial and more. There are no fees and no volume commitments, and your own your expirations. Our placement center staff assists with quoting, issuing and binding accounts for agents.
Big “I” Alliance Blue Plus is an optional add on opportunity to receive discounted pricing from featured vendors offering operation and technology solutions; education and marketing support and more. Blue Plus status is automatically conferred on Alliance Gold agencies; Alliance Blue members may enhance their Blue registration with Blue Plus by paying an annual access fee. Registration for Blue Plus will open soon.
Big “I” Alliance Gold is an evolution of the legacy Eagle Agency program. Alliance Gold agents get direct access to carriers and underwriters, profit sharing and incentive eligibility, ownership of expirations and much more. Big “I” Alliance Gold is a true agency alliance designed to benefit agents by aggregating premium and expanding market access opportunities for our members. We are pleased to share that several member agencies have already joined Big “I” Alliance Gold.
Market Aggregators
Market aggregators provide assistance to new agents in setting up their first agency office, access to otherwise unattainable markets and niche programs, the opportunity to obtain direct company appointments and a chance to share in the network’s profitability. In return, these networks usually ask agents to pay a percentage of commission, a membership fee, or require them to give up a small stake in the value of the book of business built up through the aggregator. Be sure to review the contractual relationship with these entities carefully, especially as they relate to book ownership, commission or revenue sharing and exit costs.
Choosing an Agency Management System (AMS)
This can be critical in securing live time information from insurance companies and in servicing your clients. These systems may allow you to develop work flows to help with client renewals and live feeds to insurance companies all while updating applications and keeping your files current should a client contact the insurance company directly.
The costs for these systems can vary greatly as can the ability to customize for your specific needs. Agency management software can range can average in cost from less than $1,000 to around $5,000 for a startup operation with monthly fees of $60 to $600 depending on the number of users. You will find vendor comparisons for both hardware and software and checklist to be used in making your decision which will help maximize productivity and profitability.
During the implementation process you will be asked to set up a chart of accounts along with several other important structural divisions inside your Agency Management System. With this in mind you want to make sure the system fits your agency
Insurors of Tennessee members receive discounts through Vertafore which provides insurance management systems built for your business. Members also have exclusive access to Agents Council on Technology (ACT) which is an organization made up of independent agencies to offer resources in selecting the right Agency Management System.
Workflow Procedures
One of the best ways to avoid a costly mistake is to create and develop a Policy and Procedures Manual for your agency. A clear workflow agency process will help your new firm consistently handle renewals as well as policy changes and claims throughout the year.
Use the Internet and Social Media to Enhance Your Agency’s Visibility to Others
Developing a Website
Creating a website will be your launching point to reach consumers, tell your unique story and highlight the value of your agency. Insurors of Tennessee has recommended vendors and discounts for logo design, website development, and hosting through Trusted Choice Preferred Vendors.
Marketing
Establishing a plan that incorporates social media and digital advertising will enhance your agency’s visibility in your local community.
Trusted Choice is the National Brand for Independent Agents. Trusted Choice can help amplify your local marketing and gain access to referrals by offering a variety of logo options, campaigns and as an added bonus Trusted Choice will reimburse a portion of your marketing expenses for co-branding!
Referrals
Members receive a free profile on TrustedChoice.com where consumers can search for local independent agents in their area and begin the online quoting process, which can drive additional business to your agency.
Property & Casualty Licensees in Tennessee must complete 24 hours of CE every two years in the line for which the license is held with at least 3 hour in ethics. requirements.
Insurors of Tennessee offers our members an opportunity not only to complete these required hours, but also to obtain professional designations in the process. We also offer CE through ABEN.TV to get CE via webinar. We have a variety of classes that qualify for the Ethics CE Requirement as well as classes that are approved for the SwissRe E&O policy credit for members that have their E&O with the Insurors of Tennessee.
Members also have access to the Big I Virtual University that covers many insurance topics from insurance experts.
Hire and Train Your Team
Whether it is inside service staff or sales staff, your reputation will only be as good as your people and Insurors of Tennessee has resources to help.
Big "I" Hires - A one stop resource to find, attract, assess and hire top performing Service Staff and Producers.
Caliper & Omnia - Personality profiling tools
Employment Contract - Available for Insurors of Tennessee Members
As a new insurance agent, you’ll also want to make sure that your agency is protected with commercial insurance. There are several kinds of coverage to consider:
Property & Casualty insurance: General liability coverage will protect you in a wide variety of situations. One of the most common risks is claims of bodily injury if a client is injured while in your office. Something as simple as tripping over carpet could result in an injury and a liability claim. This coverage can be combined with commercial property insurance and employee dishonesty in a business owner’s policy, often at a discounted rate.
Errors and Omissions: E&O coverage is required by almost all insurance companies before you will be allowed to write their policies. This protects your clients against errors that you or your staff may make. For example, you might accidentally delete the wrong car from a policy, and it isn’t covered in an accident. If it is an error that you are responsible for, your E&O coverage will take care of the client.
Workers’ Compensation: Workers’ compensation coverage is designed to protect your agency from claims involving your employees. If an employee is injured while at work, it will pay a portion of their lost wages and medical bills. Even if you only have part-time workers, workers’ compensation is required for businesses in most states.
ERISA bonds – These are required when offering 401K benefits to your employees.
Employee Health Insurance or any other benefits you might offer such as dental or vision care and long term/short term disability.
Attend an Insurors of Tennessee Event
Agency members who have attended our events cite the relationships they have built with mentors, carriers, and other Big I Partners as some of the most important connections they have made in their career. View our Event Calendar
Identify and attend local events in your community through membership with your local Chamber of Commerce, by joining a civic organization such as Rotary or Jaycees.